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Keeping the deal clear

Who gets what percentage of the company?

Is the percentage ownership subject to vesting based on continued participation in the


What are the roles and responsibilities of the founders?

If one founder leaves, does the company or the other founder have the right to buy back that
founders shares? At what price?

How much time commitment to the business is expected of each founder?

What salaries (if any), are the founders entitled to? How can that be changed?

How are key decisions and day-to-day decisions of the business to be made? (certain decisions
should solely be in the hands of the CEO? Others can be on majority vote, unanimous vote)

Under what circumstances can a founder be removed as an employee of the business? (usually,
this would be a Board decision)

What assets or cash into the business does each founder contribute or invest?

How will a sale of the business be decided?

What happens if one founder isnt living up to expectations under the founder agreement? How
is it resolved?

What is the overall goal and vision for the business?

2. Standard Contracts

Get sample contracts of what other people do in the industry. There is no need to re-invent a

Make sure you have an experienced business lawyer doing the drafting, one that already has
good forms to start with.

Make sure you make it look like a standard form pre-printed contract with typeface and font size.

Dont make it so ridiculously long that the other side will throw up their hands when they see it.

Make sure you have clearly spelled out pricing, when payment is due, and what penalties or
interest is owed if payment isnt made.

Try and minimize or negate any representations and warranties about the product or service.

Include limitations on your liability if the product or service doesnt meet expectations.

Include a force majeure clause relieving you from breach if unforeseen events occur.

Include a clause on how disputes will be resolved. Our preference is for confidential binding
arbitration in front of one arbitrator.
3. Employment Documentation

Stock Option documents (if a corporation has been formed), including a Stock Incentive Plan,
Notice of Stock Option Grant, and Option Agreement

At-Will employment offer letters (signed by the company and the employee, acknowledging
that the employee or employer could terminate employment at-will)

Confidential Information and Inventions Assignment Agreement (discussed below)

Employee Handbook (setting forth company policies on vacation, conflicts of interest, internet
usage, etc.)

Benefit forms, for benefits available to employees and family members (e.g., health insurance,
dental insurance, PF, etc.)

4. Taking into account these important issues:

Choice of legal entity.

Payroll tax.
Existing employment declaration.
Stock option issues.
Tax Incentives and depreciation

5. Having a good terms of use and privacy policy

6. Having the right counsel

a. Corporation, commercial, and securities law

b. Contract law

c. Employment law

d. Intellectual property laws

e. Real estate laws

f. Tax laws

g. Franchise laws